Saudi Arabia to add 5.1 GW of solar capacity by 2031, Fitch says

Saudi Arabia, one of the world's leading oil producers, is expected to deploy about 5.1 GW of solar capacity between 2022 and 2031 despite its ambitious targets and huge potential, Fitch Solutions said in a report last week.

The kingdom has great potential for the development of solar energy such as high irradiation rates and vast areas of land for power plants combined with a projected strong increase in electricity demand in the next decade, Fitch Solutions explained.

The country also set ambitious targets in its National Renewable Energy Programme (NREP), part of Vision 2030. Under NREP, Saudi Arabia seeks to raise the share of renewable energy and gas to about 50% and reduce the use of liquid fuel in a bid to diversify the energy mix in power generation. As part of the programme, more than 1.7 GW of solar capacity has been allocated so far and large-scale green hydrogen projects are also being planned, Fitch Solutions noted.

In March, the kingdom awarded two solar projects with a combined capacity of 1 GW.

Saudi Arabia’s International Company for Water and Power Projects (TADAWUL:2082), or ACWA Power, won a 25-year power purchase agreement (PPA) for the 700-MW Ar Rass solar photovoltaic project that will be built in the central part of the kingdom.

The second project was awarded to Jinko Power Technology Co Ltd (SHA:601778). The Chinese company will build a 300-MW solar park in the Central Province about 80 kilometres (49.71 miles) from the capital Riyadh.

As of the end of 2021, Saudi Arabia had an installed solar capacity of 518 MW.

Despite the potential and the high targets, Fitch's analysts remain cautious in their forecast because of the fact that the sector has performed far below the government's targets until now.

Solar power growth in Saudi Arabia is expected to face headwinds also because of the existing restrictions on foreign private ownership in the industry and the dominant positions of large state-owned utilities.

Although the forecast is for the deployment of only 5.1 GW of solar over the next decade, Fitch Solutions stressed that Saudi Arabia has significant upside potential.

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